Weighted Average Method–Allocating Joint Product Cost

Weighted Average Method–Allocating Joint Product Cost:

Learning Objectives:

  1. Explain the procedure of allocating joint product cost when weighted average method is used.

many industries, the previously described methods do not give a satisfactory answer to the joint cost apportionment problem. For this reason, weight factors are often assigned to each unit, based upon size of the unit, difficulty of manufacture, time consumed in making the unit, difference in type of labor employed, amount of materials used etc. Finished production of every kind is multiplied by weight factors to apportion to total joint cost to individual units.

Using figures from the average unit cost method page, weight factors assigned to the four products might be as follows:

Example:

Product A

3 Points

Product B

12 Points

Product C

13.5 Points

Product D

15 Points

The joint production cost allocation would result in these values:

Product Units      × Points   = Weighted Units × Cost Per Units*  = Joint Production Cost
A 20,000 3 60,000 0.20 $12,000
B 15,000 12 180,000 0.20 $36,000
C 10,000 13.5 135,000 0.20 $27,000
D 15,000 15 225,000 0.20 $45,000
————- ————
600,000 $120,000
======= =======
*Total joint production cost / Total number of weighted units= $ 120,000 / 600,000

= $0.20 per unit

You may also be interested in other articles from “by products and joint products” chapter

  1. Difficulties in costing by products and joint products
  2. Joint Products and Joint Product Costs
  3. Characteristics of Joint Products and Cost
  4. By Products
  5. Recognition of Gross Revenue
  6. Recognition of Net Revenue
  7. Replacement cost method
  8. Market value method or reversal cost method
  9. The market or sales value method, based on the relative market values of the individual products.
  10. The quantitative or physical unit method, based on some physical measurement unit such as weight, linear measure, or volume.
  11. The average unit cost method.
  12. The weighted average method, based on a predetermined standard or index of production.

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